Paytm to use Aadhaar authentication to upgrade customers to its payment bank

The electronic know-your-customer system known as eKYC, which will be offered through Aadhaar, is part of an initiative called India StackAditi Shrivastava&Neha Alawadhi | ET Bureau | September 12, 2016, 12:06 IST

Image for representation purpose onlyEcommerce company Paytm has launched an electronic, Aadhaar-based client-authentication system that will help upgrade its digital wallet customers to account holders of its upcoming payment bank and enable them to carry out transactions exceeding Rs. 10,000 a month.

The electronic know-your-customer system known as eKYC, which will be offered through Aadhaar, is part of an initiative called India Stack. It allows third-party entities to use Aadhaar for authentication, digital signatures through eSign, a unified payment interface and privacy-protected data sharing.

e-KYC provides near-instant verification of a customer’s identity and address on the basis of fingerprint or iris scans that are compared with biometrics recorded in the Aadhaar database and authenticated. Paytm will also capture a customer’s consent using the Aadhaar-based e-Sign, ensuring that the entire process is paperless.

"With eKYC, the Paytm payment bank will have a great start with an Aadhaar-linked savings account. It also helps us build superior AML (anti-money laundering) and fraud protection systems as each customer is biometrically verified," Vijay Shekhar Sharma, CEO of Paytm, told ET.

"We believe India Stack is a great foundation of technology resources capable of building useful services for the masses. Aadhaar is the foundation of it and we can leverage it from day one."

Paytm was among 11 entities that received inprinciple payment bank licences from the Reserve Bank of India last year. Others who got the approval include Reliance Industries, Vodafone and Bharti Airtel.

Two weeks ago, Reliance Chairman Mukesh Ambani announced that Reliance Jio Infocomm’s SIM cards will be activated instantly with eKYC verification using Aadhaar data and a customer’s fingerprints.

"It is a very happy coincidence that we have two big new entrants – one in telecom and one in banking – using Aadhaar-based eKYC. That’s a huge commitment to Aadhaar," said Nandan Nilekani, Infosys cofounder and former chairman of the Unique Identification Authority of India, which issues Aadhaar numbers to Indian residents.

Nilekani explained that eKYC for Paytm wallets will help the company once its payment bank goes live. Most Paytm wallets hold less than Rs 10,000 in cases where customer authentication hasn’t been done.

"Now they want to migrate these customers to the bank, but a bank requires KYC. So Paytm is upgrading them from a Rs 10,000 wallet to a Rs 1 lakh wallet, which has KYC done already. When the bank goes live, these customers can simply migrate to the bank," he said.

Sharma said Paytm is targeting the acquisition of over 25 million additional KYC customers in the coming year.